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Soros Loses Challenge to Insider Trading Conviction

By Nicola Clark October 6, 2011 9:05 amOctober 6, 2011 9:05 am

Philippe Wojazer/ReutersGeorge Soros was convicted of insider trading by a French appeals court in 2002.

5:47 p.m. | Updated

PARIS — George Soros, known as one of the world’s savviest investors, should have realized that he risked violating insider trading laws when he pocketed more than $3 million from dealing in shares of the French bank Société Générale two decades ago, Europe’s highest human rights court ruled on Thursday.

France’s insider trading laws were sufficiently clear at the time to hold Mr. Soros criminally responsible, even though a separate investigation by the country’s stock market regulator failed to find wrongdoing, the European Court of Human Rights ruled.

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“Mr. Soros was a famous institutional investor, well known to the business community and a participant in major financial projects,” the court, which is based in Strasbourg, said in a statement about its ruling. “As a result of his status and experience, he could not have been unaware that his decision to invest” risked violating insider trading laws. The court added that, given “there had been no comparable precedent, he should have been particularly prudent.”

Mr. Soros, 81, was convicted of insider trading in 2002 by a French appeals court and fined 2.2 million euros — the equivalent of what he was accused of making — after a Paris court found that he had bought and sold shares of Société Générale in 1988 with the knowledge that the bank might be a takeover target. Two co-defendants, one of them a former senior official of the French Finance Ministry, were acquitted.

The case dates back to the privatization of Société Générale by a center-right government in 1987. The following year, a Socialist-led government sought to regain control of the bank. Sensing an opportunity, a group of investors connected to the French financier Georges Pébereau devised a plan to acquire control of the bank, sending its share price soaring.

Mr. Pébereau’s raid was unsuccessful. But in September 1988, an associate of Mr. Pébereau informed Mr. Soros of the plans for the bid in a telephone conversation, according to court testimony in the case. (Georges Pébereau is the brother of Michel Pébereau, who was chief executive of BNP Paribas, a Société Générale rival, from 1993 to 2003.)

France’s stock market regulator opened an investigation into the case in 1989, but determined that Mr. Soros had not violated French insider rules, which at the time restricted only employees of the companies concerned from trading on privileged information.

The law was revised in 1990 to apply to third parties. Mr. Soros maintained that France had amended its insider trading laws because of his conduct, an argument that the panel of seven human rights judges said Thursday it did not support.

In its 4-to-3 decision, the court said laws were written to be applied to a range of different situations, and that therefore the wording of statutes was not always precise. In the Soros case, “in view of the subject matter, well-informed professionals had a duty to be prudent in their work and to take special care in assessing the risks of their actions,” it added.

Mr. Soros’s Paris-based lawyer, Ron Soffer, said the discrepancy between the findings by the market regulator and those of the criminal court demonstrated that French insider trading laws at the time were too vague to be enforced consistently.

“The court seems to be saying that Mr. Soros and other investors should somehow have had a clearer view of the law than the people who were charged with applying it,” Mr. Soffer said, referring to market regulators.

Mr. Soffer said Mr. Soros would appeal the decision to the Grand Chamber of human rights court. If the Grand Chamber agrees to hear the case, a ruling could come late next year or in 2013, he said.